Peak Oil is You

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Page added on June 29, 2006

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America the Dangerous?

Activist and financier George Soros on the global energy crisis and why he thinks the United States has become an obstacle to a stable and just world.

…We are facing a global energy crisis which is very complex because it has many ingredients, starting with global warming and the peaking of oil discoveries. And there’s the dependence of many of the major industrial countries on sources of energy from politically unstable areas of the world and the behavior of some of the energy rich countries like Iran and Venezuela and Russia exploiting the high price of oil and their control of the supply. So we are in fact in a global energy crisis. That instability has certainly added $20-$30 to the price of oil.

What’s the biggest threat to the health of the American economy?

The puncturing of the housing bubble is the most immediate danger. U.S. households have a negative savings rate because of the double-digit appreciation in houses. That created equity that people have been withdrawing [in the form of home equity loans and cash-out refinancing]. They withdrew $900 billion last year which is an amount even larger than our trade deficit. People spent some of that money because they feel rich, and excess spending by U.S. consumers has been the main motor of the world economy. Now the music has stopped. House prices have stopped rising at such a rapid rate. They may in fact fall temporarily because of the rise in interest rates. That would cause a worldwide slow down. With falling house prices, consumers will feel the need to increase their savings. The savings rate is about five percent lower than normal now. When you go back to a normal savings rate, then that five percent falls out of the economy, causing the slowdown.


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